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Sunday, 30 August 2015

Oman’s Islamic banking could achieve 17% of total banking asset in 5 years, Bank Nizwa CEO

MUSCAT: Islamic banking in Oman could achieve around 15 to 17 per cent of the total banking asset within the next five years in normal market conditions with recovery and stability in the oil market, says a bank official.

Speaking to the Times of Oman, Dr Jamil El Jaroudi, chief executive officer of Bank Nizwa, said it is ‘difficult’ to estimate the share of Oman’s Islamic banking operations at this juncture due to the volatility in oil prices, which is affecting the country’s growth.

According to the Central Bank of Oman, the combined assets of Islamic banks and window operations surged ahead by 64.08 per cent to OMR1,832.6 million by end-June 2015, from OMR1,116.9 million for the same period last year, while conventional banks’ total assets moved up by 11.22 per cent to OMR27,391.9 million, over the same period of 2014.

“This is an important variable that would determine the nature of the competition for the banking sector going forward,” El Jaroudi noted.

However, assuming a normal market condition and recovery with some stability in the oil price, it is fair to assume that Islamic banking could achieve a level of around 15 to 17 per cent of the total banking asset within the next five years, he added.

“This level would be similar to the other markets in the region including the United Arab Emirates (UAE) and Bahrain,” said the CEO of Bank Nizwa.

Remarkable growth

Commenting on the performance of Islamic banking in Oman, El Jaroudi said, “If you look at the industry reports, both fully-fledged Islamic banks in Oman and Islamic windows combined saw an average growth rate of over 40 per cent year-on-year, in terms of total assets.”

The average growth for conventional banks on the other hand was around nine per cent for the same period, he added.

“In terms of financing portfolio growth, it is even more remarkable, as we have grown by more than 300 per cent on an average during the same period, compared to the conventional banks’ average of approximately 15 per cent,” the official noted.

Other countries

He added that these figures are in line with the other countries in the region which are experiencing the same challenges in growing their Islamic banking industries.

“For example, the five-year compound annual growth rate (CAGR) in Qatar was 31 per cent which is 1.8 times faster than its conventional banking with $54 billion worth of Islamic assets representing 24 per cent market share,” he said.

In the UAE, it is lower at 14 per cent but still three times faster than its conventional banking sector with $83 billion worth of Islamic assets representing 17 per cent market share, El Jaroudi explained.

He added that in some other countries, the Islamic banking sector has experienced more challenges that curtailed its growth altogether, although it could be due to geo-politics or that Muslims are not the majority in those markets.

“So we have to look at the growth of this growing sector in Oman and appreciate its achievements thus far,” the CEO of Bank Nizwa concluded.

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